How Long Does It Take To Join a Captive Insurer?

Even for agents who know about captive insurance and its benefits, explaining the process of getting into a captive insurer to your clients can be tricky. Some of your clients might be expecting quick solutions. After all, the traditional market tends to have quicker turnover. So when they hear that joining a captive or forming one can take weeks, they could get impatient.

At Captive Coalition, our sole purpose is to help independent agents not only understand captives but also be able to break down the time commitment for their best clients to join or set up a captive. Our goal is to make the process of making your client a captive owner as smooth as possible. 

In this article, you’ll be shown how to explain the timeline to your clients, from the initial setup through regulatory approvals. You’ll learn how to set expectations early and where to streamline the process. 

Factors to Consider When Setting Up a Captive Insurer?

Setting up a captive isn’t the same as selling a traditional insurance policy. It’s not as simple as having your client sign a policy and going from there. You’re basically helping your client set up their own insurance company. This requires more time, careful planning, and due diligence.

Key Factors Include:

• Captive Structure Complexity – Setting up a captive means structuring a new entity to manage risks. The formation process differs depending on whether it’s a single-parent or group captive insurer. The structure might require more paperwork and regulatory approvals. 

• Pre-Qualification and Financial Review – Before your client can enter the captive, there's a pre-qualification process. What needs to be analyzed are your client’s financials, claims history, and risk management practices to ensure they are a good fit. Any missing or delayed information will slow down this process. 

• Client Education – Delays can come from a lack of understanding of the documents needed and how the process works. Clients may not know what’s involved, which can lead to confusion or hesitation. If your client goes through the process without the necessary information of what they need, getting them into a captive will take longer.

• Regulatory Approvals – Captive insurance is governed by specific regulations, which differ based on the type of captive and the jurisdiction it’s set up in. This means waiting for approvals from regulatory bodies, which can take weeks, depending on the circumstances. 

How to Shorten the Timeline

Provide Complete Documentation Early

The most common reason for delays is incomplete or missing documentation. If you can quickly collect and submit all requested data—loss runs, financials, and risk management documents—the captive can be formed faster or your client will have an easier time to join an established group captive. 

Educate Your Clients Upfront

Ensuring your client understands what a captive is and how it works from the start can reduce the number of questions during the process. That said, always address client concerns. Either way, walk them through the benefits, drawbacks, and long-term commitments so there are no surprises later. 

Clarify Financial Commitments Early

Many clients aren’t prepared for the capital requirements of a captive. They need to know about the upfront investment and collateral—a line of credit or cash reserve used to secure claims payment. The clearer you are on these points and the better prepared your clients are, the fewer obstacles there will be when it’s time to secure funding.

Common Questions About the Captive Setup Time

“It’ll take forever, no matter what.”

This isn’t true and is one of many misconceptions about captive insurance. While the process can take up to 90 days, it doesn’t have to go on for long. When clients and agents provide the necessary information quickly and stay engaged throughout the process, establishing or joining a captive happens much faster.

“Once we’re in, we can leave anytime.”

While this is technically true with your client being able to exit anytime, this doesn’t mean they’ll get their invested capital back immediately. The collateral will be tied up until all policy years are closed, which can take five to seven years. 

Do Your Best Clients Want to be Captive Owners?

Setting up or joining a captive can take time. Understanding the process can help your clients. Gathering the necessary documentation, educating clients early, and setting expectations can speed up the process. 

To get ahead of educating your clients, make sure they know about the financial advantages and disadvantages of captive insurance. You’ll also want them to understand what collateral is in captive insurance. 

If you have any other questions or want to schedule a consultation, click the button below to speak with one of Captive Coalition’s captive consultants.